Wirecard - Ignore The Noise And Focus On Fundamentals?

Mar. 21, 2019 11:13 AM ETWirecard AG (WCAGY), WRCDFADYYF, AMZN, AXP, BABA, TCOM, FISV, INGIF, MA, PYPL, SQ, TCEHY, TCTZF, V, WP53 Comments
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Güner Soysal


  • The company is facing allegations regarding balance sheet, invoicing and turnover.
  • According to media reports, the final report of the external law firm could be published in the course of this week.
  • Regardless of the allegations, it is important to know the company's fundamental situation in order to be able to react if the allegations prove to be false.
  • According to an article in the Süddeutsche Zeitung dated March 17, 2019, the results of the investigation by the external law firm Rajah & Tann are expected in the course of this week.
  • Furthermore, I will include my field reports from last year's shareholders' meeting held on June 21, 2018, in which I participated as a speaker in the Q&A session and also had the opportunity to have a personal conversation with CEO Dr. Markus Braun.

1. Introduction

Wirecard (OTCPK:WRCDF;OTCPK:WCAGY), until recently the high flyer on the German stock exchange, which last year had managed to rise to the highest German index, Dax 30, and in terms of market capitalization left the two major German banks Deutsche Bank and Commerzbank behind, is once again in the spotlight - but this time on a less pleasant matter.

At the end of January, the Financial Times, citing a whistleblower and based on a preliminary report by the law firm Rajah & Tann dated May 4, 2018, reported that there were internal allegations of inconsistencies against Wirecard in Singapore. The allegations concern possible falsification of invoices, contracts and balance sheets. The accusations even go so far as to claim that there were fictitious transactions between international subsidiaries in order to inflate the balance sheets (such as showing higher assets than is actually the case) and thus obtain a license from supervisory authorities for the Asian business (the growth potential in Asia has been one of my key reasons for investing in Wirecard).

Meanwhile, Wirecard denied all misconduct in a conference call held in early February, claiming that an internal investigation had led to evidence that the allegations were unfounded. Nevertheless, the Company had commissioned an external investigation from the law firm Rajah & Tann, which enjoys a very good reputation and is specialized in compliance cases. After an interview, the firm initially considered the employee to be credible and then, in mid-May 2018, was commissioned to investigate the matter in more detail. According to Wirecard, the investigations covered revenues of around seven million euros over a period of more than three years (if this information is true, it would represent 0.5% of revenues in fiscal year 2017; see transcript of conference call dated February 4, 2019).

Based on allegations

This article was written by

Güner Soysal profile picture
Real Financial Dynamics - Investing In Growth In Every Market Phase. Banker, Investor, Investment Advisor, Wealth Manager, Finance Blogger from Germany. Website | Instagram | LinkedIn | Güner Soysal

Disclosure: I am/we are long WRCDF, WCAGY, ADYEN, ADYYF, SQ, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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